UK gas prices fall, ample supply trumps Russia cut

British winter gas prices fell on Friday, despite Russia cutting off Ukraine's gas supplies in a move that could affect flows to Europe.

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02 Ocak 2009 Cuma 14:26

British winter gas prices fell on Friday, despite Russia cutting off Ukraine's gas supplies on Thursday in a move that could affect flows to Europe, as milder weather sapped demand for the heating fuel.

Britain gets very little gas from Russia but a drop in Russian gas exports to continental Europe could make European traders reluctant to sell into the UK through pipeline links to the Netherlands and Belgium.

Plentiful gas production from the UK's own fields, Norway and storage sites kept the national network comfortably supplied with gas on Friday morning, pushing gas prices for the weekend down 1.75 pence to 56.75 pence per therm and Monday contracts down a penny to 59 pence.

"Everything looks quite comfortable and nobody seems to be putting any risk in with the Russian-Ukraine problems," one UK gas trader said.

"I guess everyone expects it to be resolved fairly soon and if its resolved over the next day or so then it shouldn't cause any problems, there is plenty of storage to cover things as well."

Both sides have said that Europe's supplies will be unaffected by the cut in a dispute between Kiev and Moscow over payments, but continental European countries were monitoring flows closely on Friday for pressure drops. The UK gas market seemed unmoved by the cut off on Friday, with gas for delivery in February diving 3.20 pence to 55.50 pence per therm, while March fell 3.50 pence to 55.50.

Prompt power prices firmed however, supported by the unplanned shutdown on Friday of British Energy's Dungeness B21 nuclear power reactor and an expected rise in demand next week after the holiday period ends.

Baseload electricity for Monday traded at around 70.50 pounds per megawatt hour, compared to around 60 pounds paid last Monday for Tuesday baseload contracts, according to one broker.